ITLG VC/CEO Panel Discussion

October 12, 2009

Next week (week beginning 19 October) the Irish Technology Leadership Group will be in Belfast. Among them, international investors will be looking for companies north and south to talk to and perhaps do business with.

On Wednesday 21st a panel discussion will be held in Belfast City Hall with VCs and Senior Executives from Silicon Valley. There will be an audience of more than 150 people who will be a mix of start-up CEO’s, industry leaders, university leaders, politicians and government officials.

I’ll be chairing the panel.

I think it is important that the agenda for the conversation and question and answer session is set by the audience. The panel will be talking about who they are and why they are in Belfast. The audience will be able to ask questions, discuss opinions, explore ideas. But I would really like the readers of this blog (and others, too) to help me set the theme for the day.

My background is journalism, broadcasting and digital media. Technology is much wider than that and the issues around technology are important to Northern Ireland. What is the importance of Digital Healthcare? Is Clean Tech really the Next Big Thing? What are we doing in Bio Tech? Is business in Northern Ireland “investor ready”? Come to that what does “investor ready” really mean?

I do not want to wait until the beginning of the session to start the conversation and set the theme. With your help – whether you are going to be there or not – I would like to start the conversation now. What are the Big Issues? What are the Big Questions? You can email me ds@davysims.co.uk or or add to the blog.

Davy, I am rather annoyed that I’ll be in London and will miss the ITLG events. As you are aware I’m running a Gov 2.0 focused event in London next week called Government 2010. One point that I’d make – that might be a subject for discussion – is there is no obvious reason in my view that Northern Ireland should be any more (or less) attractive as an investment location as other regions. However, I do think there is a mind-set among firms here that the end-game is about establishing a business here rather than establishing a viable business per se. In other words, I think we have a tendency to be parochial – and too many companies are tied here for too long after seed funding. More firms, I believe, should look towards the Delaware flip scenario sooner. Because our funders can’t sustain companies much beyond seed – and to get access to VC markets in the US HQ relo is pretty much essential.

We have some local talent – of that there is no doubt. But too often it flounders because of lack of vision for growth and appallingly low levels of funding.

Jeff

October 12, 2009

Andrew Bruce

1) What does the panel consider to be the key criteria for the emergence of VC funding within a geographical region and how does Northern Ireland compare against that criteria?

2) Do they believe that infrastructure such as that provided by Project Kelvin makes a real difference to creating a more enterprising environment for businesses?

3) To what extent is Northern Ireland still seen as a “low cost” offshoring facility?

4) How have academic institutions such as Stanford University influenced the economic landscape in Silicon Valley, and how does that differ from the activities of our tertiary level academic institutions.

Unfortunately I’ll be out if the country when the event takes place, but I think it’s a great idea and I wish you well with it.

The sad reality is that we need external help with changing some things. We need to work on the confidence and vision as Jeff says. We also need to resolve the funding gap – as Jeff says – but the introduction of Venture Capital, without attendant expertise is pointless. We have no experienced software managers here – and very few experienced folk in other technology fields.

So where are we going to get them?

The last thing we should be doing is prostrating ourselves before smart money when we are, in comparison, dumb. I know that the ITLG does not plan to come in here and bamboozle the natives with their guns and fire-water. But we want to know the detail of the alternative.

And yes, I know what their response is – it’s something we’ve been working on for the last three months. But I’d like to hear it vocalised in a public forum.

As the cost of starting a Web company decreases, thanks to cloud computing services and technology that entrepreneurs can rent instead of buy, many founders can finance a new company without the help of venture capitalists. More often than not, they are choosing to sell small, immature companies instead of taking the longer, riskier path of developing a business that could one day go public.

Investment in Web start-ups was relatively flat in 2008 at $4.9 billion for the year, but fell 26 percent to $787 million in the fourth quarter. That reflects venture capitalists’ growing wariness of Web companies that depend solely on advertising for revenue, as digital ad budgets are being slashed, particularly for experimental new sites.

Denis there is business to be had – even in the current climate – from Web 2.0. The unit value of software has declined but significant volumes are available for the taking: witness 37 Signals; Google Apps (most businesses pay for GoogleMail); ConstantContact and the rest. However, few significant Web 2.0 businesses have done it without pretty significant VC – and the difficulty NI companies have is that the indigenous market is tiny and they need to ‘get out’ as soon as possible – not just for funding but also for market. However few do and funders are very poor at encouraging it. If I were a VC here I’d only seed fund on condition of a Delaware flip prior to A round.

I think there are huge Web 2.0 opportunities – especially in terms of verticalising cloud apps.

But the vision thing is too often missing in local companies. And a big chunk of vision has to be about getting to where the money is – in more senses than one. Northern Ireland is just too parochial. And management thinking is often worse even than that.

Part of this may be because job creation agencies want to keep jobs here. But my view is that if a company grows faster and gets prosperous by growing from an overseas market, there is obvious up-side in terms of employment here. Plus that employment tends to be more stable than inward investment based jobs and body shops that can close on a sixpence.

Matt is right that the debate is worth having. But the current model isn’t working and the knowledge economy has never really shown the leadership that everybody expected. A new model is needed – but the problem is that the people who could create this new model are too busy doing other things.

Investors put $4.1 billion into 277 clean-tech start-ups in 2008, 52 percent more than they invested the year before while investment in software companies fell 10 percent to $4.9 billion in 2008, and the fourth quarter was particularly brutal. The $1 billion invested in software start-ups in the quarter marked the lowest quarterly investment in a decade.

Why is there a flight from software to clean-tech ? Is software still a viable space for venture investing?